This presentation is part of: O52-3 (2122) Impact of EU Enlargement and EMU Creation on Companies

A Decomposition Analysis of Inequality Measures in Poland

Alina Jedrzejczak, Ph.D., Department of Statistical Methods, University of Lodz, Faculty of Economics and Sociology, 41 Rewolucji 1905r. Street, Lodz, Poland, 90-214, Poland

   Objectives: The main objective is to identify main sources of income inequality in Poland which is one of the highest in Europe.

    Methods: The desirable feature of an inequality measure is its decomposability by income sources and by subpopulations.  It is known that the Gini index of concentration is decomposable in the sum of the inequality within groups and the inequality between groups plus  a crossover term that takes into account the overlapping across subgroups, while the indices based on entropy can be decomposed simply into within-group and between-group components.
       In the paper the selected decomposition methods for the Gini index were analyzed and then applied to the analysis of income distributions in Poland. The decomposition by income components was used to investigate the contribution of different income sources to the overall  inequality. A special attention was devoted to the study of the relationships between income factors within “wages and salaries”.  Moreover the households were partitioned according to the condition of the head of household  in order to verify to what extent the inequality in the selected subpopulations  contributes to the overall inequality. The basis for the calculations was individual data coming from the Houshold Budgets Survey conducted by Polish Central Statistical Office.
    Results:  The main source of income inequality in Poland is wages and salaries. Incomes from social insurance and social transfers have negative contribution to the overall inequality. The net contribution of the Gini inequality between socio-eonomic groups is about 42% while the within-groups inequality contributes to overall Gini in 31%.  The methods of inequality decomposition presented in the paper can be appealing  tools for income distribution analysis  because of their clear economic interpretation.